02/09/2002

Summit to Consider More Hedge-Fund Firms After Backing Boscott

Summit to Consider More Hedge-Fund Firms After Backing Boscott

London, Sept. 2 (Bloomberg) - - The Summit Group Ltd., a London-based venture-capital firm that completed its first investment in a hedge-fund company this year, is considering backing more companies in the $600 billion industry.

Summit, which has about $31 million in investments, completed backing Oxford & Cambridge Investment Management Ltd., a hedge-fund company set up by former Barclays Global Investors researcher Ed Boscott, in April this year, Kit Hunter Gordon, managing director at Summit, said in an interview.

Hedge funds, investments designed for the wealthy and institutions, are usually started using a manager’s own money or with cash from other, established hedge-fund companies. The funds, which can make money from falling as well as rising asset prices, pulled in $10 billion in the first half of 2002 after attracting a record $31 billion last year, according to consultant Tremont Advisors Inc.

Hedge funds’ “approach will become progressively more attractive,” said Summit’s Hunter Gordon, who’s previous investments include medical products and waste-processing companies. “As a class of investment, we would look at it again.”

Summit’s Hunter Gordon said he expects demand will continue to rise for investments that aren’t correlated with equities.

Fees

The CSFB/Tremont Hedge Fund Performance Index, which tracks almost 400 of the world’s largest hedge funds, was unchanged in the first seven months of this year, while the benchmark MSCI World stock index lost 17 percent.

Hedge-fund company fees - - an annual management charge of 1 percent to 2 percent of assets and a performance fee of about 20 percent a year - - and their institutional and wealthy clients also make them attractive investments, said Hunter Gordon.

Summit’s investment may be the first by a U. K. venture-capital firm invested in a hedge-fund company, according to the British Venture Capital Association.

“I haven’t heard of a VC company backing a hedge fund house before,” said John Mackie, chief executive officer of the BVCA, in an interview. “However, if our members think a company’s got good prospects and good management, they will look at it.”

U. K. venture capital firms invested 6.2 billion pounds ($9.5 billion) in 2001, according to the BVCA. More than half of the companies that received money are in computer-related, communications, biotechnology and medical industries. Leisure, entertainment, retail construction and support services companies shared most of the rest.

Summit invests between 250,000 pounds and 1 million pounds in any one company, and aims for a return of 1000 percent after five to 10 years, Hunter Gordon said. He declined to specify how much Summit invested in Boscott’s new company.

- - Alistair Barr for Bloomberg